Why Client-Attorney Privilege Matters for Compliance Officers

by GAN Integrity on June 15th, 2017

Why Client-Attorney Privilege Matters for Compliance Officers

“Client-attorney privilege” is one of those terms that pops up with some regularity on police procedural TV shows like the “Law & Order” series. The basic goal of this privilege is to encourage full and frank communication between attorneys and their clients by protecting those communications. But did you know that this privilege can also apply to internal compliance investigations and the work of the Chief Compliance Officer?

This article looks at why client-attorney privilege matters in compliance and what exactly it protects, and lists five practical tips for CCOs and others working in compliance.

Why Client Attorney Privilege Matters in Compliance?

Privilege is used to protect information, but its value as a legal strategy depends on the specifics and merits of each individual case. For example, attorney privilege can be crucial tool for protecting a variety of records, audits and other information. However, organizations may also choose to waive privilege and instead disclose information to appease government investigators or to reach a Deferred or a Non-Prosecution Agreement with authorities.

CCOs and the people working for them are often lawyers themselves, doing work that overlaps or is similar to that of the general counsels. For example, CCOs often conduct investigations that may be relevant for future litigation, interview witnesses, and communicate with individuals regarding a potential claim. During normal, day-to-day compliance work, advice given by the CCO is probably not covered by client-attorney privilege. This advice is intended to ensure that employees comply with regulations and rules and is not considered legal advice. When it comes to internal investigations, however, the privilege could apply if the CCO is supporting the investigation as a licensed attorney.

That’s why it’s important for the CCO and others to understand the general principles of client-attorney privilege and what it does (and does not) protect.

What Does the Privilege Protect?

Simply being an attorney (or speaking to one) does not automatically protect your conversations. In the United States, privilege does not attach to communications “simply because they are made by or to a person who happens to be a lawyer.” Remember, the goal of this privilege is to encourage full and frank communication between attorneys and their clients. This is accomplished by protecting: all communications made between attorney and client in confidence for the primary purpose of seeking, obtaining, or providing legal advice or services.

Now, let’s unpack each of those factors in detail.

All communications: This protects all oral and written communications (but does not protect underlying facts that are discoverable.)

Made between attorney (or agent who is acting at the direction of an attorney) and client: Someone who is working for the CCO who is not an attorney can still be covered by this privilege. On the client’s side, the “client” covers not only the general counsel, but also various employees of the client.

Made in confidence: It has to be intended to be confidential and kept that way. Merely indicating that a document is “confidential” is not sufficient; access to this information must also be limited. The only people who should have access to this confidential information are those who need it to assist counsel in seeking, obtaining, or providing legal advice.

For the primary purpose of seeking, obtaining, or providing legal advice or services: This usually covers conversations when the CCO is acting as an outside attorney, but it becomes more problematic when the CCO is acting as an in-house counsel, since he or she does usually not only provide legal advice but also business advices. This distinction is important.

The UK system is similar to the US in regards to privilege, but there are significant differences between the US, the UK and other EU member states.

When is the CCO Acting in a ‘Professional Legal Capacity’?

To use client-attorney privilege in a compliance setting, the CCO (and others acting on his/her behalf) must be acting in “professional legal capacity,” as opposed to their day-to-day business capacity. The following are several factors that have been considered by courts:

Whether the CCO or compliance staffer reports to the legal department or attends the legal department’s meetings;

Whether the CCO or staffer indicates to others that he or she is acting in a legal capacity;

Whether the CCO or staffer was explicitly instructed to assist an attorney in providing legal advice; and

The extent of the authorizing attorney’s oversight regarding the CCO or staffer.

5 Practical Steps for using Client-Attorney Privilege

Let’s say that the CCO wants to communicate confidentially with employees under client-attorney privilege. Here are five tips for effectively using the privilege:

Clearly define the terms “client” and “attorney”. In the UK for instance, defining “client” is particularly important, as the term is narrowly interpreted; make sure all involved employees are authorized to receive the legal advice. Make sure that on behalf of the attorney, there always is an acting lawyer with a license or someone directed by a lawyer.

Clearly state the purpose of your actions. First, check whether you are acting in “professional legal capacity” or not. Then, indicate expressly on the documents when you are acting in a “professional legal capacity” and, if necessary, obtain a signature from an attorney. Make sure to expressly inform the individuals you are interviewing that you are acting in a “professional legal capacity” at the outset, and consider taking additional measures, such as using your legal title instead of your business title when communicating. All of these help clarify the purpose of the CCO’s action.

Indicate documents as “confidential” and restrict access. Keep in mind that, unlike in the US, the privilege can be waived in the UK without being lost.

Train employees on attorney/client privilege. Make sure employees are aware of when privilege applies and when to indicate documents as “privileged.” Failure to understand this could lead to privilege being lost due to simple errors or oversight. Make sure they know when and how to ask for a lawyer’s assistance, and when and how to keep documents confidential. For example, employees should say, “I need legal advice from you,” rather than, “I have a question.”

Consider getting outside counsel. Sometimes you may have to show the privilege is really applying and the situation is a high risk, you should also consider getting outside counsel to further clarify the roles of those involved.